We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

You have probably heard the phrase, “You've made your bed, now lie in it.” However, it seems British Petroleum (BP) is unfamiliar with this phrase, as the oil giant spent the better part of the past two years trying to avoid the settlement it agreed to in 2012.

In the aftermath of the April 2010 Deepwater Horizon oil spill, BP reached a settlement agreement with a team of plaintiffs' attorneys representing injured parties across the Southeast region. BP championed the settlement agreement, with spokesperson Scott Dean calling it “good for the people, businesses and communities of the Gulf ” and “in the best interests of BP's stakeholder's.” However, BP grossly underestimated how much it might end up paying to claimants under the settlement and quickly tried to back-track, taking its legal appeal all the way to the U.S. Supreme Court. BP's main complaints have centered on “matching” revenue with expenses in claimants' financial statements and proving causation of damages.

MATCHING POLICY

The settlement agreement did not mandate the type of accounting procedure that a claimant must use in submitting its financial statements; this resulted in variations in the ways annual revenues and expenses were presented in claims made to the claims center. BP took issue with these variations, specifically with the way some financial statements were not sufficiently “matched,” meaning a claimant's financial records did not “match” revenue with corresponding variable expenses. BP took its complaint to court, and Judge Barbier, the district court judge overseeing the settlement agreement, ordered that Claims Administrator Patrick Juneau come up with a policy to be used by the claims center to ensure “matching” of financial records. The result was Policy 495, which was approved by Judge Barbier in May 2014, and which dramatically altered the way the claims center assessed submitted claims.

Policy 495 is a broad and sweeping change to the Deepwater Horizon settlement agreement. Due to the extraordinary backlog of claims, it is not fully clear yet just how many claims will be dramatically affected by the new, more stringent standards of Policy 495. What is clear is that the stricter guidelines are creating slower processing times for many claims, as the claims center often needs additional information from claimants in order to ensure that claims meet the requirements of Policy 495.

The obvious problem with Policy 495 is that claimants in the class are now being treated differently depending on when they submitted their claim. Those businesses that have already been paid are receiving the full benefit of the settlement agreement as it was agreed to back in 2012. Those businesses with claims currently pending, however, must now undergo significantly more scrutiny in order to receive an award. Policy 495 may cause businesses not to receive as high of an award as those same businesses may have received a year ago; in fact, Policy 495 may cause some businesses not to receive an award at all when those businesses would have qualified prior to the implementation of the policy. BP challenged this inconsistency but Judge Barbier ruled that previous awards do not need to be refunded or re-assessed under the new policy. Policy 495 will only affect those claims that were not paid as of the date Policy 495 went into effect.

CAUSATION APPEALS

The settlement agreement does not require a claimant to demonstrate that its damages were caused by the Deepwater Horizon oil spill. Instead, if a claimant from one of the covered states can pass one of the causation tests set forth in the settlement agreement, then causation is presumed and that claimant will qualify for an award. For example, under the “V Test” set out in the settlement agreement, if a claimant can show a certain percentage drop in revenues in 2010 compared to an increase in 2011, then that business may qualify for an award. Causation under the V Test is presumed (similarly, if a claimant's financials qualify under one of the other causation “tests” in the settlement agreement, causation is likewise presumed).

Despite the clear language of the settlement agreement regarding causation and BP's prior acknowledgment that the presumed method of causation testing was fair, BP completely changed course once it realized that its total claims liability would greatly exceed what BP initially expected. Instead of abiding by the terms of the settlement it agreed to, in late 2013 BP went back to the district court, seeking a ruling that claimants must affirmatively prove that their damages were a result of the oil spill. After the district court denied BP's request to re-write the settlement agreement, BP appealed to the Fifth Circuit Court of Appeals, which likewise ruled that BP must abide by the terms of the settlement agreement in terms of causation and business payments. Still unsatisfied, BP appealed to the U.S. Supreme Court, but the Supreme Court denied certiorari in December 2014, effectively stamping out BP's challenges to the settlement agreement.

MOVING FORWARD

Although there is still a backlog of claims and Policy 495 has slowed the processing of claims, the good news is that regular payment of claims has resumed. Each claim is different, and the claims center is requiring additional information from many claimants in order to comply with Policy 495, but payments are being made.

The Supreme Court's denial of certiorari also established the deadline for filing business economic claims. Claims not filed on or before June 8, 2015 will not be considered by the settlement claims center.

Compare jurisdictions: Data Security & Cybercrime

"Lexology is a good barometer of a firm's expertise as the articles showcase a firm's understanding of the issues involved and how up to date their knowledge is. It's a good one stop solution where one is able to view the same law/cases from different perspectives; on the whole I would rate Lexology as a good service."